Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Asset Liability Management topic
No spam. Unsubscribe anytime.
Consultant reintroduces 'split valuation' to de‑risk pension as funded ratio improves
Summary
A pension consultant reintroduced a 'split valuation' approach that would use surplus assets to buy a fixed‑income matching portfolio to stabilize funded status while avoiding an increase in normal cost and contribution rates; trustees asked for actuarial, legal and auditor reviews as staff begins a formal ALM study with Meketa.
Bill, a consultant presenting to the Police & Fire Pension Plan board, reintroduced a "split valuation" method intended to reduce the fund's exposure to market shocks as the plan approaches full funding. He illustrated an example in which a plan roughly 105% funded (liabilities about $6.3 billion, assets over $6.6 billion) could use the surplus (approximately $317 million in his example) to buy a high‑quality fixed‑income matching portfolio valued at a lower discount rate (Bill used 5.6% vs. the plan's 6.625% in his model). Bill said the approach "allows the use of a more conservative asset allocation to stabilize the funding, preserve your funded status, without increasing the normal cost for member contribution rates."
